Press Conference by the Minister for Financial Services

(Excerpt)

30 September, 2002

I was appointed by the Prime Minister to serve as the Minister for Financial Services as well as the Minister for Economic and Fiscal Policy.

As the Prime Minister stated at a press conference minute ago, I believe it is a message that coherent, firm policies must be carried out with the economy and the finance sector combined. Even the current non-performing loan (NPL) problem exemplifies this: while the financial authority need to tackle this firmly as a matter of course, it is indispensable to work with the Ministry of Economy, Trade and Industry (METI) and the Ministry of Land, Infrastructure and Transport (MLIT) in view of recovery of industries, as well as with the Bank of Japan (BOJ). I suppose my tasks are to make a comprehensive judgment on monetary policies and fiscal policies and come up with a firm plan. Taking account of the Prime Minister's intension firmly, I intend to proceed with the policies for structural reform more quickly, on a larger scale, in a more easy-to-understand manner for the Japanese people than before.

In regard to individual problems, I still have to do a lot of studying. In a sense, they are basically indicated in the so-called Basic Policies in 2001, the Structural Reform and Medium-term Perspective in January 2002, and the follow-up to the Basic Policies in June 2002. The idea is to revive the economy by reforming four areas at once, that is, the reform of government expenditure, the reform of government revenue; those constitute tax system reform, the reform of the financial system and regulatory reform. I intend to develop a solid Japanese economy based on dynamic activities in these four areas.

Q.

With respect to the perception of the current situation of the financial sector, the Prime Minister said in the press conference a minute ago that under normal circumstances, everything should be left to the market, but under emergency circumstances, the government must tackle the situation in unity with the BOJ. The confusion in the debates on injection of public funds is partly attributable to the question as to whether current situation corresponds to the risks of financial crisis in the light of relevant laws. First of all, what is your view on the current financial situation?

A.

Basically, it should be acknowledged that the Japanese financial system is in an extremely sick state. Even if the BOJ increases the base money by more than 30% on a year-on-year basis, the money supply will only increase by 3% or 3.5%. Additionally, bank lending is on the decrease. Under these circumstances, the so-called financial intermediation functions are deteriorating rapidly. For healthy economic development, money must be supplied extremely quickly and it should smoothly and gradually increase. The fact that this is not happening as a result should be strongly acknowledged.

The term ''crisis'' is used often, but discussions on whether we are in a crisis or not always become confusing because some people refer to crisis as a panic situation while others refer to it as a more ailing condition. Although there is no panic at present, it is important to acknowledge that there are areas that need to be cured properly.

Q.

Mr. Takenaka, you have made many positive comments about the injection of public funds - can you tell us why? Are your comments based not only on the atmosphere but also on some kind of complied data?

Also, in relation to this point, do you have little confidence in the NPL data and other data released by the Financial Services Agency (FSA) and its views, including those relating to financial crisis?

A.

Firstly, there is a misunderstanding that I have stated that injection of public funds is needed.

However, I have suggested that the financial problems should be reviewed, including the issue of injection of public funds, based on some objective and circumstantial evidence. As to whether there is such data, the authority is the only ones in the position to make the right judgment, as I have already mentioned a number of times.

However, there is a kind of circumstantial evidence: for example, a company that has created a revitalization plan may not necessarily be appreciated in terms of its stock price. Also, a company that is claimed to have a strong, sufficient capital base may not be appreciated by the market as far as its stock price is concerned. In my opinion, there are extremely indirect signals as such.

Although I don't think either the market's view or the authorities' one is wrong, there is no recovery of the Japanese economy unless we make this gap smaller. As I am now assigned to work from the authorities' standpoint, I intend to make firm judgments based on my view on the problems as such.

Q.

Some people claim that the combined reform of both corporate and the financial sectors, which was also attempted by the former minister, should have been tackled by MLIT or METI. What is your opinion on this? Also, you were appointed from the private sector. Financial problems are extremely prone to be exposed to criticism, and they are technical problems as well. How do you consider your role as a minister appointed from the private sector in tackling these problems?

A.

I am aware that former Minister for Financial Services, Mr. Hakuo Yanagisawa, has worked extremely hard to cooperate with METI and MLIT. The problem relating to current Japanese policies, not only the NPL problem, is in the situation similar to the prisoner's dilemma in many aspects: people are happy to clean up the mess in their own domain but otherwise do not want to do anything unless others do something first.

In regard to the NPL problem, my impression is that the FSA has tended to be the only one bearing the brunt of criticism. As a matter of course, the issue of industrial revitalization should be tackled steadily by METI, and the problem concerning big construction companies should be dealt with firmly by MLIT. Nothing will work out however, unless the Ministries stop restricting themselves to their respective domains and start fully playing their respective roles for the common good.

That is what the Council on Economic and Fiscal Policy is for. The Prime Minister's order is to carry out economic and financial reform en bloc, by utilizing such places.

As I am also the minister in charge of the Council on Economic and Fiscal Policy, I would like to strongly request ministries and agencies for their cooperation, and ask the Prime Minister the same if necessary, to overcome the existing barriers.

The second point, with respect to my role as a minister appointed from the private sector, the Prime Minister frequently says putting the right person in the right place. Financial problems are especially technical and complicated compared to other economic problems. As a result, the problems have been trivialized in the past: for example, the issue of capital injection overshadowed other issues, or if anything happened, there were suggestions that the utilizing Resolution and Collection Company (RCC) to solve the problem. In that sense, as an individual who studied economics, my role is to proudly engage in disciplined policy discussions that would be appreciated by the global market, in consideration of the technical aspects.

I would also like to add that it might be meaningful for someone like me, who has no attachment to anything, to get involved in such significant problems.